Building a financial market that serves the poor requires more than supporting institutions. It also requires coordinating underlying elements - such as educating consumers, drafting appropriate laws, and building capacity in organizations.
How can aid agencies begin to ‘take’ market development thinking and practice into their efforts to enhance financial services for poor people? Drawing from wider experience, here are five basic starting points to consider.
With increasing scrutiny of aid budgets in donor countries, the pressures to prove impact of development programs are higher than ever before. It is relatively easy to assess impacts in a backward-looking fashion when there is already some record of progress, but measurement challenges are more daunting at the start of a program, when impact assessment needs to be forward-looking.
Being able to measure and demonstrate progress are critical issues as taxpayers and other funders of donors and DFIs require explanations and justifications of the use of their limited resources. A handful of donors are starting to experiment with different tools for measuring progress in agricultural and other non-financial markets. It is difficult work, especially when attempting to measure attributable and sustainable changes to a market system.
Market systems are dynamic and changes stimulated by projects are rarely linear, making it difficult to match each activity with a single output and outcome. Rather, activities can generate multiple outputs, and outcomes are interconnected and can occur at different points in the market system. Moreover, traditional M&E approaches tend to emphasize baseline and end line indicators such as volumes and values of production, productivity, income. However, we found that changes in relationships, interactions and behaviors of market actors were much better indicators of sustainable change. Yet these indicators are more challenging to capture.